The Oregon Supreme Court Once Again Affirms a Blockbuster Punitive Damages Award Against Philip Morris
- Even in the Face of a U.S. Supreme Court Decision Seemingly to the Contrary


Tuesday, Feb. 12, 2008

Two weeks ago, the Oregon Supreme Court affirmed--for the third time--a $79.5 million punitive damages award against Philip Morris, in a case where the jury had awarded only a little over one percent of that amount -- $821,485.50 -- in compensatory damages.

The plaintiff was the widow of a smoker named Jesse Williams, who died from lung cancer. She alleged that Philip Morris had defrauded her husband and many other smokers, in Oregon and across the U.S., about the risks of smoking.

This decision is incredible because, last year, it seemed that the United States Supreme Court had, in a very important decision, had ruled, in this very same case, that the jury instructions used to achieve that same punitive damages award had violated due process.

Did the Oregon Supreme Court simply refuse to heed the U.S. Supreme Court's decision? In this column, I'll consider that question.

The U.S. Supreme Court's Decision, and the Question It Conspicuously Avoided

I wrote about the Philip Morris decision in a column last year. There, I pointed out that the U.S. Supreme Court had decided to decide the case on very narrow, procedural grounds and had thus avoided reaching more controversial issues of substantive due process that would have led it to ask whether the 100:1 ratio permitted by the Oregon courts was, as a matter of constitutional law, too high. Instead, the court did not address that issue at all.

Many observers were particularly disappointed that the U.S. Supreme Court did not reaffirm its statement in State Farm Mut. Insurance Co. v. Campbell that ratios of punitive to compensatory damages, except in special circumstances, should not exceed "single digit ratios" - implying that the 100:1 ratio at issue in the Oregon case (and, indeed, even a 10:1 ratio) would be too high.

Prior Expectations About How the Oregon Supreme Court Would Respond

At that point, observers expected that, at the very least, the Oregon Supreme Court would respond to the U.S. Supreme Court's order vacating the punitive damages award by ordering a new trial or by remittitur (an appellate court's power to appropriately reduce a jury award). After all, Justice Breyer, writing for a five-Justice majority, had held that there was a significant chance that the jury instructions that were given by the trial judge had permitted the jury to punish Philip Morris for tortiously injuring smokers other than Jesse Williams, when only he was a plaintiff in the case. (Importantly, this case was not a class action, as many cases against Big Tobacco have been.)

But that is not what the Oregon Supreme Court did. Instead, it simply reinstated the original award - the very one that the U.S. Supreme Court had vacated.

The Reasons that May Have Led the Oregon Supreme Court to Reinstate the Award

The simplest explanation for why the Oregon Supreme Court reinstated the award is that it read Justice Breyer's opinion more closely than perhaps Breyer intended. As the Oregon Supreme Court noted, Breyer wrote that the application of the correct standard of procedural due process on remand, "may lead to the need for a new trial, or a change in the level of the punitive damages award" (emphasis added) - not that it must lead to one of these consequences. According to the Oregon Supreme Court, Breyer therefore left open the possibility that the state court might neither order a new trial, nor order remittitur, but might instead pick a third choice. And what else could that choice be, but reinstatement?

The Oregon Supreme Court held that reinstatement of the award was appropriate because there were independent and adequate state law grounds for doing so. Those grounds had never been previously identified by the Oregon Supreme Court in its two earlier decisions (the ones that had been reversed by the U.S. Supreme Court.) However, the Oregon Supreme Court now set out two such grounds:

First, the Oregon Supreme Court deemed the jury instructions that Philip Morris had proferred, and that the trial judge had rejected, to have been inadequate on state law (that is, Oregon law) grounds. These instructions had told the jury that it could not punish Philip Morris for harms caused to others, only harms to Jesse Williams. The Oregon Supreme Court now noticed that the proferred instructions, although correct from the point of view of the Fourteenth Amendment's Due Process Clause, diverged from Oregon's statutory pattern jury instructions for punitive damages in ways that had nothing to do the constitutional issues raised by Philip Morris.

Second, the Oregon Supreme Court held that the jury instructions that the jury did receive --which correctly reflected state law by instructing the jury that it could punish Philip Morris for harms caused to others--could not be appealed. The Oregon Supreme Court reasoned that Philip Morris had not properly preserved the right to appeal the instructions during its initial appeal to the Court of Appeals in 2002.

Was the Oregon Supreme Court's Opinion Heroic, Dangerously Defiant, or Simply Formalistic?

There are a number of ways to think about what the Oregon Supreme Court has done. One might view it as standing up heroically to the United States Supreme Court, in the same way that the Ohio Supreme Court in the 1859 case Ex Parte Bushnell refused to apply the federal law of slavery even after the United States Supreme Court had decided Dred Scott.

The only problem with this analogy, however, is that it is clear, in retrospect, that the Ohio Supreme Court was self-consciously refusing to follow the law, and that its members did so because the issue at hand was so overwhelmingly important. Since the Civil War, of course, we have had less happy experiences with state supreme courts declaring their independence from the U.S. Supreme Court - in order, for instance, to keep segregation in place. Furthermore, while the evils of the tobacco industry may be very deeply felt by some, it is ridiculous to place it on the same level as slavery.

The most reasonable and interesting way to understand the Oregon Supreme Court's decision, my view is that the court's Justices were acting formalistically - that is, literally putting form over substance. As a matter of substance, it was perfectly clear what Philip Morris was complaining of when it went twice to the United States Supreme Court and three times to the Oregon Supreme Court. Its reasons for appealing were plainly stated on its petition for certiorari, which asked the United States Supreme Court to decide the following question: "Whether the Oregon courts deprived Philip Morris of due process by permitting the jury to punish Philip Morris for harms to non-parties." This statement of the case clearly suggests that Philip Morris was asking not only for its own proposed instructions to be approved, but also for the instructions which were in fact given to be disapproved.

The formalism of the Oregon Supreme Court also extended to its reading of Justice Breyer's final sentence in his opinion for the majority. Read in context, that sentence could mean that the United States Supreme Court envisioned that the only options following their rejection of Oregon's defense of the jury instructions that given "may" be a new trial "or" a change in the award by remittitur. But as noted above, the Oregon Supreme Court read it to suggest that there some third unmentioned option. That interpretation makes no sense, however, given that the much more natural reading is that Breyer was simply listing two possible options, with the word "may" stating an alternative parallel (not in addition) to the word "or."

A final bit of formalism, on the part of the Oregon Supreme Court, that deserves mention is this: It is not clear that Philip Morris waived its right to appeal the jury instructions that were given in 2002, as the Oregon Supreme Court stated. The Oregon Supreme Court said in its opinion two weeks ago that its 2006 opinion in the Williams case explains how this waiver occurred. In fact, the 2006 opinion does not explain the point, but simply restates it: "But Philip Morris did not preserve that argument before the Court of Appeals." Nor does the 2002 Court of Appeals decision provide any explanation - or even suggest that the argument was not properly preserved. Instead, the 2002 opinion says that Philip Morris "assigns error to the trial court's failure to instruct the jury that its award should bear a reasonable relationship to the harm caused to Williams."

While the Formalistic Interpretation Was Far From Ideal, It Allowed the Oregon Supreme Court to Rule Against a Widely-Hated Defendant

Overall, it is very hard to see why the best reading of the argument made by Philip Morris to the Court of Appeals in 2002 was the narrow one the Oregon Supreme Court said Philip Morris was making: the argument that, only by giving Philip Morris's proposed instructions, could the jury find a reasonable relationship between the award and the harm caused to the plaintiff. The Oregon Court of Appeal's words suggest, instead, that Philip Morris was appealing the fact that the instructions that were given "fail[ed] to instruct the jury that its award should bear a reasonable relationship to the harm caused to Williams." In other words, it seems more reasonable to interpret Philip Morris as having asked the trial court to give some reasonable-relationship instruction - even if not necessarily the one Philip Morris had proposed.

In other words, the Oregon Supreme Court could have read the Philip Morris's cert petition, or Breyer's conclusion, or the 2002 appellate decision for their substance, as opposed as to a counterintuitive formal or literal meaning. And had it done so, its interpretation would have been much more persuasive. But a substantive interpretation would have meant giving a victory to a hated tobacco-company defendant--one that had forced the United States Supreme Court to twice intervene in Oregon's own local search for justice on behalf of an Oregonian whom a jury had found was defrauded by the company and killed by its product.

It is possible, as some commentators have suggested, that the United States Supreme Court will now weary of Philip Morris' fight with the Oregon courts, and may refuse to take cert a third time. This is a reasonable prediction, but I hope it is not a correct one.

I agree that it is unlikely that the Court will hear the case again, and decide it on the substantive due process grounds it avoided last year. Indeed, Philip Morris may not even want to gamble on asking it to do so. As I noted in my earlier column, it is not clear to me that there are five votes for applying the "single digit" ratio rule to a case involving wrongful death, as opposed to fraud involving property, and I am not sure that Philip Morris wants to go to the Supreme Court (again) just to find that out.

Nevertheless, I would like the United States Supreme Court to take some time out of its busy schedule to vacate the recent Oregon decision, and to remand with instructions that the jury verdict be retried with instructions that do not violate the Constitution. That would be a fitting response to a state court that seems to think that winning is the only thing that matters.

Anthony J. Sebok, a FindLaw columnist, is a Professor at Benjamin N. Cardozo School of Law in New York City. His other columns on tort issues may be found in the archive of his columns on this site.